Fiduciary Q and A; A former sec regulator explains what every advisor needs to know about the fiduciary standard

To act as a fiduciary is to serve in a relationship of trust and confidence that carries with it duties of loyalty, due care and utmost good faith. Due diligence is how professionals show they're exercising skill and good judgment. It means taking the time to understand the client, including his financial situation and investment objectives; having a clearly articulated investment strategy that has been tested; and recommending products that the professional has researched and believes fit the investment strategy. The Investor Protection Act made it through the House Financial Services Committee in early November and was referred to the full House. It will be part of a comprehensive financial reform bill that Committee Chair Barney Frank would like to have ready for President Obama's signature by Christmas. Under the legislation, the SEC would have authority to adopt rules that: 1. apply a fiduciary duty to broker-dealers and investment advisors who provide personalized investment advice to retail customers; 2. restrict or prohibit sales practices, conflicts of interest and compensation schemes contrary to investors' interests; and 3. require simple, clear disclosures to investors regarding their relationship with their financial professionals.